Thursday, November 24, 2011

The Microsoft courtship of Yahoo has officially moved from rumor to confirmed. Microsoft and Yahoo have taken a very early step in the buying process. Microsoft and Yahoo have signed a nondisclosure agreement, which means Microsoft can now poke around at Yahoo’s financials to see if it wants to make an offer.

There have been several recent rumors of Microsoft trying to buy Yahoo, as well as several other possible suitors such as AOL. While other companies may be interested in buying Yahoo none of the other big name companies have signed a nondisclosure. Now that Microsoft is able to look over Yahoo’s books it can decide what exactly it wants to do moving forward.

It still isn’t clear if Microsoft will be buying Yahoo outright or if it will partner with equity firms and make an investment in the search giant. A couple of private equity companies have also signed nondisclosures with Yahoo, but their interest looks to be in making an investment rather than making a purchase.

There are several reasons why Microsoft should be interested in Yahoo, most notably would be search. Yahoo powers the sales behind Microsoft’s Bing search results, and we are sure Microsoft wouldn’t want someone else taking that over. It is also possible that Microsoft will want to intergrate Skype into some of Yahoo’s services, such as yahoo messenger.

No matter what ends up happening Yahoo needs some form of help, either from Microsoft or someone else. Even Yahoo’s iconic San Francisco billboard is feeling the crunch. This is only the first step in the process, and by no means is a for sure signal that Microsoft will actually buy Yahoo.